Conduct of Employment Agencies and Employment Business Regulations 2003

This page provides an introduction to these regulations and how they affect interim managers and users of interim services.

The Conduct of Employment Agencies and Employment Business Regulations 2003 (“the Regulations”) were originally implemented to protect vulnerable agency workers from the more dominant employment agencies and employment businesses. They impose restrictions on the way in which the worker and the employment business or agency deal with one another which can slow down the engagement process and involve additional costs for all parties.

In the knowledge that many limited interim companies wish to be treated as businesses in their own right in relation to taxation, employment and agency regulations, there is an opt-out procedure which, if completed, allows the parties to conduct business free from the constraints set out in the Regulations. The procedure involves signature of an opt-out agreement on behalf of both the limited interim company and the individual to be supplied.

The Regulations were amended by the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007 ("the 2007 Regulations") which came into force in April 2008. Whilst the changes brought about by the 2007 Regulations are limited, they were designed to further protect agency workers and reduce the administrative burdens on employment agencies.

What does this mean for interim managers?

Prior to deciding whether to opt-out, the interim service provider should decide whether it wants to benefit from the Regulations. One of the key provisions of the Regulations affecting contractors is that employment businesses are unable to withhold the whole or part of a worker's pay purely because the employment business has not received payment from the client. It is considered that this provision alone persuades many limited company contractors who are concerned about their IR35 tax status to “opt-out” of the protection otherwise afforded by the Regulations. This provision in the Regulations removes an element of “financial risk” for the contractor but accepting or having a degree of “financial risk” is regarded as a significant “pointer” towards self-employed status.

If the interim is in any doubt as to whether they should agree to “opt-out” of the Regulations then they are recommended to take their own independent professional advice.

What does this mean for users of Interim services?

Clients often need interim managers at short notice so the less restriction involved in procuring their services the better. Most clients therefore see the benefits of using the services of limited interim companies that have opted out of the Regulations.

Where can I find out more?

For more detailed guidelines on The Conduct of Employment Agencies and Employment Business Regulations 2003, please refer to the REC website.

The contents of this article are intended for general information purposes only and shall not be deemed to be or constitute legal advice. The summaries represent our understanding of the law as at November 14th 2007 and it is subject to change at any time. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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